VA Mortgage Loans for Veterans
If you’ve served in the military, you’re entitled to apply for a special mortgage program through the Department of Veterans Affairs, which can help you get a low interest rate and flexible terms. Since it was established as part of the 1944 GI Bill, more than 21 million service members have become home owners through VA (Veterans Administration) loans.
What military borrowers need to know about VA loan benefits:
Note: This information is provided for reference only, and is subject to change. Please check with a licensed real estate agent and/or mortgage lending officer for the most up-to-date terms and to apply.
There’s no time limit on when you can use your benefit. Your loan entitlement is a benefit earned as part of your military service, and it never expires.
Entitlement can be reused. If you no longer own the property you bought with a VA loan and the loan is paid off, you can have your entitlement restored and use it to buy another house. If the loan is paid off but you still own the home, you can have your entitlement restored once and use a VA loan to purchase another home. That way, the first house can be kept for retirement or a second home.
Interest rates are usually lower than conventional mortgages. This, combined with the fact that there’s no mortgage insurance added in, means you’ll have a lower monthly payment.
Must be for your primary residence. When you take out a VA loan, it must be for the house you intend to live in, so it can’t be used to buy a vacation home or an investment property.
The VA doesn’t issue the loans, but they are the guarantor. The loans are issued by lenders just like any other mortgage, but the Veterans Administration guarantees it will repay up to a fourth of the loan amount if the borrower defaults on the loan. This is what helps veterans get such low rates and great terms.
You can apply even if you have lower credit scores, foreclosure or bankruptcy. Even if you have imperfect credit, you may be able to qualify for a VA home loan. While the minimum credit score required to qualify is determined by the lender, it’s generally lower than what you’d need to get a conventional or FHA loan. VA loans also typically allow borrowers to have a higher debt-to-income ratio than other mortgages.
Low or no down payment. Compared to conventional loans, which require a 20% down payment to avoid private mortgage insurance or FHA loans that require at least 3.5% down, VA loans have a lower up-front investment.
Mortgage insurance isn’t required, but there is a VA funding fee. The charge is waived for most veterans with service-connected disabilities and for surviving spouses of service members who died during service.
There’s no pre-payment penalty. The Veterans Administration guarantees the loans for a term of 15 – 30 years, but they can be paid off early without a fee.
Co-borrower is typically limited to spouse or another veteran. And, the co-borrower must also intend to live in the house. Not all lenders offer VA loans if the co-borrower won’t occupy the house and isn’t a veteran with VA entitlement or a spouse. If you can find one that does, expect to pay a down payment.
The VA limits the closing costs buyers can pay. This means you won’t be stuck with unnecessary processing fees from title companies or loan servicers
Property condition requirements are more rigorous than conventional loans. Basically, VA loans are for homes that are move-in ready, whether they’re condos, single-family homes, modular homes, or even some multi-unit properties. In other words, this isn’t a good finance option if you’re looking to buy a fixer-upper.
If you’re a veteran looking for a realtor to help you with your home purchase, Coldwell Banker Plaza Real Estate agents have experience working with VA loan lenders. Find an agent today!